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Washington, DC, Mayor Vincent Gray has not announced a decision yet on whether he will veto the bill to require big, billion-dollar retailers to pay a fair wage to their employees in the District of Columbia. The writing seems to be on the wall, however, given that Gray’s deputy mayor for planning and economic development, Victor Hoskins, is holding the bill up as a “job killer.”

Why is a bill that requires total compensation far below the national median wage ($16.30) considered a job killer? The Large Retailer Accountability Act would require the biggest retailers to pay $12.50 an hour in total compensation (wages and benefits), barely more than the federal poverty income threshold of $23,550 for a family of four and nowhere near what it costs to live in the District. The LRAA is flexible and permits a lower wage: it would permit an $11.50 an hour wage, for example, if the business paid other benefits like health care or a pension contribution that equaled at least $1.00. How is that a job killer for a billion dollar corporation? Well, it just is, says Walmart, which has threatened to abandon plans for three new stores in DC if the bill is enacted.

For politicians, the prospects of visible new jobs (no matter how poorly they pay) are almost irresistible, so any threat to the three Walmart stores, however much it smacks of bullying and exploitation, makes some of them blind to the other implications of Walmart jobs paying about $8.90 an hour.

Let’s look at just the local consequences, and ignore Walmart’s role as a funder of right-wing causes, its vicious anti-unionism, and its impact on manufacturing employees (PDF) around the globe, whose wages Walmart relentlessly suppresses.

First, because Walmart refuses to pay decent wages, its employees here (as they are elsewhere around the country) will be among the biggest users of public assistance. In essence, Walmart’s business model is to shift the cost of employment from itself to taxpayers at the local, state and federal level, so DC taxpayers can expect to pick up a hefty tab for the 300 workers at a DC superstore. According to a report by the Democratic staff of the House Education and Workforce Committee, the typical Walmart store’s employees are subsidized by taxpayers to the tune of about $900,000 in food stamps, housing assistance, child-care subsidies, reduced-price school lunches, and other forms of assistance.

Second, the long-term effect of Walmart is to kill jobs, not to create them. David Neumark, an economist at the University of California and the National Bureau of Economic Research, and two colleagues studied the history of Walmart’s growth and the impact Walmart has had on local labor markets. They estimate that each Walmart store opening results in a county-wide net loss of 150 jobs, implying that 1.4 jobs are destroyed for each retail store job Walmart creates. They also found that Walmart has a substantial, negative effect on retail wages, reducing them by more than a million dollars.

Other research suggests that the net job-creation benefits of a new Walmart are minimal, at best. That is because when Walmart opens a store, it often drives other retailers—and services—like hair salons, nail studios, and other local operations, out of business and employees in these small businesses lose their jobs. A 2004 paper (PDF) from economist Emek Basker of the University of Missouri found that the introduction of a Wal-Mart to a community usually raised retail employment by 100 jobs at first, but that number fell to a net gain of 50 jobs in the long run.

I have talked to DC councilmembers who argue that there are so few retail stores in the District that Walmart won’t kill many jobs in DC; lots of District residents shop in Prince George’s County, so the competing businesses that will lose sales and jobs will be someone else’s problem. But there are, in fact, scores of small businesses in the District that Walmart will hurt. By requiring Walmart to pay higher wages, the LRAA would help those small businesses since more money in the pockets of Walmart employees should mean more gets spent in their stores.

In addition to everything else, Walmart brings opportunity costs. I think the chances of attracting better corporate citizens will be reduced if Walmart is allowed to pay its typical exploitative wages. The presence of six Walmarts will make it less likely that the District attracts more Costco stores, or other responsible retailers, like Winco, which makes its employees shareholders and provides both decent wages and pension benefits.

For all these reasons and more, I hope that Mayor Vincent Gray signs the LRAA or if he doesn’t, that Councilmembers Tommy Wells and Mary Cheh rethink their opposition to the bill and vote to override his veto. Both are in the unfortunate position now of having voted to permit the biggest, richest retailers in North America to pay sub-poverty wages in the District of Columbia. Gray, Wells and Cheh should not be afraid of offending Walmart, whose profits in 2011 totaled $15.7 billion; they should proudly take the side of the workers who make those profits possible and demand a fairer wage.

I agree that Wal-Mart does not pay a living wage. I don’t patronize Wal-Mart, its my silent protest. However I do not see a market failure that would be cured by this law. This piece of legislation will have external effects in the market both geographically and in the future supply of labor in D.C..
It is a bold move for D.C. to start this discussion but it seems to me this legislation is not the fix. In fact, it seems dangerous road with unexpected consquences.

Johnny Appleseed

Walmart has a 3.6% profit margin and DC has a 10% corporate income tax – who is the greedy one?